Stocks Pare Gains As Oil Prices Rally

Stocks were well off their highs but still posting solid gains after unexpected strength in retail sales and a multibillion-dollar takeover bid in the brewing sector.

The market lost some of its gains after oil prices , which initially were off more than $3 a barrel, rallied in the afternoon and ended up near $137.

Advances were broad based, with shares of big manufacturers such as Caterpillar - up nearly 2 percent -- and plane maker Boeing - up nearly 4 percent -- among the biggest gainers, followed by shares of financial services companies.

Shares of brewer Anheuser-Busch jumped more than 6 percent following news that the maker of Bud Light and Michelob beers had received an unsolicited $46.3 billion takeover bid from Belgian rival InBev

ADRs of InBev jumped amid enthusiasm for the Anheuser-Busch deal. If it goes through, the deal would be the biggest takeover in the beer industry ever. However, analysts say InBev, which makes Stella Artois and Beck's beers, will probably raise the price from the initial $65 a share it was offering for Anheuser-Busch.

But even with the advance investors kept one eye on developments at Lehman Brothers after the investment bank replaced its chief financial officer and its chief operating officer.

The recovery for banks is still a long way off, despite their efforts to raise capital, Meredith Whitney, executive direct of equity research at Oppenheimer & Co, said. Whitney said all bank dividends are at risk.

Like an instant prophecy, KeyCorp cut its dividend in half and said it plans to raise $1.5 billion in fresh capital.

In a sign the tide may be turning, however, Morgan Stanley upgraded its rating on financial stocks and downgraded its rating on the energy sector.

Shareholders of American International Group are asking for changes to the management and board of the world's largest insurer, which has been struggling with the fallout of the subprime mortgage mess.

Standouts also included technology shares, with wireless chip maker Qualcomm up nearly 4 percent after raising its quarterly profit outlook.